Usually when you perform a query on a claim most attention are put in the basic interest rate, the percentage value of the same or if this is fixed or variable. Although the interest rate is an important factor is the Financial Cost Total (CFT) which represents the true cost of credit and consists of items that add to the total value thereof. These points are the following concepts. The base interest rate that determines the whole quota (fixed or variable). Life insurance, fire, etc.. The cost of evaluation and appraisal. Administrative costs. The costs of account maintenance.
As we saw above the basic interest rate (variable / fixed) is a good indicator but not the only nor the most important. Consider the following example for this definition is clearer. Suppose that: A Bank applies a basic rate of 10% and life insurance of 0.05% of outstanding debt. In addition the Bank B applies a rate of 9% and insurance 0.12% life, the evaluation costs are $ 1,000 and account maintenance fee of $ 2 per month. The loan of $ 30,000 and 10 years later.
The results are as follows: Bank A has a CFT of 11.12% and Bank B a CFT of 12%. While the Bank A has a basic interest rate higher than Bank B, the Financial Cost Total (CFT) is smaller. This is due to additional expenses are lower and therefore the final amount of credit B is also lower. So when choosing a credit must take into account all costs and make a comparison with reference to the Financial Cost Total (CFT) and not only the basic interest rate. The bank is required to inform the final fee will be charged for all expenses included. The CFT is expressed as effective annual rate in percentage terms as the basic interest rate should be borne in mind that not all banks charge the same costs, reclaim some insurance, other savings banks are open without charge to debit the payment of fees or bonuses made advance payments. Greetings. Juan Manuel Perez Diaz